Published in Finance

Exit Planning Institute forms West Michigan chapter

BY Sunday, June 09, 2019 07:00pm

GRAND RAPIDS — When advisers begin to prepare a business for a transition and sale, they also need to prepare the entrepreneur for what’s next.

That’s according to Chris Snider, president and CEO of Westlake, Ohio-based Exit Planning Institute, who argues that business is inherently personal.

Chris Snider, Exit Planning Institute PHOTO: MARK SANCHEZ

Snider often has seen business owners get cold feet just before closing on the sale of their companies because they’re unsure what to do next, worry whether they’re getting enough for the business to live on, and experience an “identity crisis.”

“They start making up reasons not to do the deal,” Snider said. “All of these emotions are going on. ‘What am I going to do? This has been my baby.’ There’s this idea of separating business from personal. When you’re an owner, it’s ludicrous to think there’s separation. Your business is you.”

An educational company that certifies advisers in exit planning, the Exit Planning Institute has about 30 chapters across the country, the latest of which just formed in West Michigan.

Speaking at a recent kickoff meeting for the local Exit Planning Institute chapter, Snider urged advisers to focus on preparing both the owner and the business for the transition.

“We’ve been educating them wrong about what exit planning is,” he said. “We have a job to do and when it comes to exit planning, the first thing we need to do is hit the reset button.”

The new Exit Planning Institute chapter plans to hold monthly meetings for professional advisers at the Grand Rapids Area Chamber of Commerce, and eventually share case studies and organize roundtables on issues around exit planning.

In forming the West Michigan chapter, organizers want to create a common framework for how advisers in the region work with clients who are looking to exit and transition their businesses.

The idea is to avoid having business owners receive conflicting advice from their CPA, attorney, wealth manager and other advisers on how to position the company and themselves for a transition, said Vincent Mastrovito, founder and president of Prometis Partners Inc., a Grand Rapids-based business strategy consulting firm. Through best practices and regular monthly events, he wants to see that “everybody is on the same page and has the same goal for the business owner” to ensure owners get good outcomes.

“The commonality is critical in order for the business owner not to have too much confusion and get bogged down in the weeds about, ‘Well, what direction do I really go? Am I going in this direction or that direction? Is my attorney way off over here and this other person here?’” Mastrovito said.

Mastrovito serves as president of the new Exit Planning Institute West Michigan chapter. Randy Rua, president of M&A firm NuVescor Group LLC in Hudsonville, and Mary Van Skiver, senior manager at Rehmann Consulting in Grand Rapids, serve as vice presidents.

The new chapter came together amid a predicted wave of business exits and transitions over the next decade as Baby Boomers sell and retire, creating a “huge opportunity” for advisers who can assist owners in planning out that process, Snider said.

West Michigan has a large percentage of privately held and family-owned businesses, many with owners who are approaching retirement age and lack a next generation to take over the company, Mastrovito said. That also serves as a driver for the local chapter’s formation, he said.

In his consulting practice, Mastrovito finds fewer clients today plan to eventually transition their family-owned businesses to a son or daughter.

“We find that the majority of the work that we’re doing, the kids don’t want any part of it. They love mom and dad and they’ve seen the business grow, but they don’t want an eight-day-a-week job,” he said. 

Mastrovito often sees business owners who are unsure what they plan to do next in life after they sell.

The lack of a clear path for business owners following their departure manifests in Exit Planning Institute survey data showing that 75 percent of sellers are unhappy after a transaction “because they don’t know what they’re going to do,” Mastrovito said.

“A lot of times they are just not ready,” he said. “I’ll ask them a simple question, at the beginning, before they even engage us: What do you plan on doing once you transition out of your business? And many times I get a deer-in-the-headlights look. ‘I’m not really sure.’”

That’s in part why Snider at the Exit Planning Institute preaches that exit planning is a constant, ongoing process for any business owner, and not something you do after deciding to sell and retire. Including exit planning as part of a company’s ongoing strategic planning also can help to get better value for the business once an exit and transition does occur, Snider said.

“Exit planning is present tense,” he said. “Exit strategy is nothing more than good business strategy. It’s what you do every day that determines that transition.”

Maintaining an updated exit plan as a regular aspect of running a business ensures that owners are prepared when they decide to exit, or in case a sudden life event occurs, such as an illness, disability or divorce, Snider said. He notes that only half of business transitions occur voluntarily for the owner.

Baby boomers in America own some 4.5 million businesses that have $10 trillion in wealth, Snider said.

Surveys the Exit Planning Institute has conducted in markets with an established chapter show that nearly eight in 10 business owners have no written transition plan, and nearly half have done no planning at all. Only 15 percent of owners have had a valuation done on their business within the last few years, and more than nine in 10 owners lack a written succession or transition plan that identifies what they intend to do after leaving the business.

“They don’t know what to do and they don’t have the time for it. ‘It’s something I’ll do later,’” Snider said. “The opportunity is tremendous for all of us.” 

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